Storage and Weather Trends

According to the U.S. Energy Information Administration (EIA), there was a withdrawal of 40 billion cubic feet (bcf) of gas from storage for the week ending March 1. This figure aligns with analyst predictions but falls short compared to the 72 bcf decrease in the same week last year and the five-year average decrease of 93 bcf. Consequently, current gas stockpiles are about 31% above the usual levels for this period.

Despite predictions of slightly cooler weather in the coming weeks, meteorologists anticipate the majority of the Lower 48 U.S. states will experience warmer than normal conditions until at least March 18, which could influence heating demand.

Production and Export Constraints

Gas output in the Lower 48 states declined to an average of 100.1 billion cubic feet per day (bcfd) in early March, a notable decrease from February’s 104.1 bcfd. This trend is partly due to reduced gas prices and a drop in daily production to a preliminary seven-week low. Major producers like Chesapeake Energy and EQT have announced plans to cut gas drilling this year.

Further impacting the market is the ongoing outage at Freeport LNG’s plant in Texas, reducing the amount of gas flowing to liquefied natural gas (LNG) export plants. LNG feedgas flows have consequently diminished, with recovery not expected until Freeport LNG resumes full operation, potentially by mid-March.

Market Outlook

In the short term, with warmer weather and production curtailments, the market could face a bearish phase. The reduced demand, alongside higher stockpiles and decreased LNG exports, suggests a potential continued downturn in gas prices. However, any changes in weather patterns or a resumption in LNG exports could alter this forecast.

Technical Analysis